Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2020

Valuation Techniques, Significant Unobservable Inputs, and Quantitative Information

The following table presents the fair values of Northern Trust’s Level 3 liabilities as of December 31, 2020 and 2019, as well as the valuation techniques, significant unobservable inputs, and quantitative information used to develop significant unobservable inputs for such liabilities as of such dates.

TABLE 55: LEVEL 3 SIGNIFICANT UNOBSERVABLE INPUTS

DECEMBER 31, 2020

FINANCIAL INSTRUMENT

FAIR VALUE

VALUATION TECHNIQUE

UNOBSERVABLE INPUTS

INPUT VALUES

WEIGHTED-AVERAGE INPUT VALUES(1)

Swaps Related to Sale of Certain Visa Class B Common Shares

$35.3 million

Discounted Cash Flow

Conversion Rate

1.62x

Visa Class A Appreciation

8.73%

Expected Duration

33 months

20 months

(1) Weighted average of expected duration based on scenario probability.

DECEMBER 31, 2019

FINANCIAL INSTRUMENT

FAIR VALUE

VALUATION TECHNIQUE

UNOBSERVABLE INPUTS

INPUT VALUES

WEIGHTED-AVERAGE INPUT VALUES(1)

Swaps Related to Sale of Certain Visa Class B Common Shares

$33.4 million

Discounted Cash Flow

Conversion Rate

1.62x

Visa Class A Appreciation

8.54%

Expected Duration

36 months

22 months

(1) Weighted average of expected duration based on scenario probability.

The following table presents the fair values of Northern Trust’s Level 3 assets that were measured at fair value on a nonrecurring basis as of December 31, 2020 and 2019, as well as the valuation technique, significant unobservable inputs, and quantitative information used to develop the significant unobservable inputs for such assets as of such dates.

TABLE 58: LEVEL 3 NONRECURRING BASIS SIGNIFICANT UNOBSERVABLE INPUTS

DECEMBER 31, 2020

FINANCIAL INSTRUMENT

FAIR VALUE(1)

VALUATION
TECHNIQUE

UNOBSERVABLE INPUTS

INPUT VALUES

WEIGHTED-AVERAGE INPUT VALUES

Loans

$24.6 million

Market Approach

Discount factor applied to real estate collateral-based loans to reflect realizable value

15.0%

–

20.0%

16.8%

(1) Includes real estate collateral-based loans and other collateral-based loans.

DECEMBER 31, 2019

FINANCIAL INSTRUMENT

FAIR VALUE(1)

VALUATION
TECHNIQUE

UNOBSERVABLE INPUTS

INPUT VALUES

WEIGHTED-AVERAGE INPUT VALUES

Loans

$8.0 million

Market Approach

Discount factor applied to real estate collateral-based loans to reflect realizable value

15.0%

–

20.0%

15.3%

(1) Includes real estate collateral-based loans and other collateral-based loans.

Assets and Liabilities Measured at Fair Value on Recurring Basis Segregated by Fair Value Hierarchy Level

The following presents assets and liabilities measured at fair value on a recurring basis as of December 31, 2020 and 2019, segregated by fair value hierarchy level.

TABLE 56: RECURRING BASIS HIERARCHY LEVELING


	DECEMBER 31, 2020
(In Millions)	LEVEL 1		LEVEL 2		LEVEL 3		NETTING		ASSETS/ LIABILITIES AT FAIR VALUE
Debt Securities
Available for Sale
U.S. Government	$	2,799.9	$	—	$	—	$	—	$	2,799.9
Obligations of States and Political Subdivisions	—		3,083.6		—		—		3,083.6
Government Sponsored Agency	—		24,956.7		—		—		24,956.7
Non-U.S. Government	—		714.0		—		—		714.0
Corporate Debt	—		2,539.6		—		—		2,539.6
Covered Bonds	—		553.1		—		—		553.1
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds	—		2,345.8		—		—		2,345.8
Other Asset-Backed	—		3,997.5		—		—		3,997.5
Commercial Mortgage-Backed	—		1,031.8		—		—		1,031.8
Total Available for Sale	2,799.9		39,222.1		—		—		42,022.0
Trading Account	—		0.5		—		—		0.5
Total Available for Sale and Trading Debt Securities	2,799.9		39,222.6		—		—		42,022.5
Other Assets
Derivative Assets
Foreign Exchange Contracts	—		4,260.7		—		(3,505.3)		755.4
Interest Rate Contracts	—		297.5		—		(2.5)		295.0

Total Derivative Assets	—		4,558.2		—		(3,507.8)		1,050.4
Other Liabilities
Derivative Liabilities
Foreign Exchange Contracts	—		4,722.5		—		(2,718.6)		2,003.9
Interest Rate Contracts	—		125.0		—		(98.5)		26.5
Other Financial Derivatives(1)	—		—		35.3		—		35.3
Total Derivative Liabilities	$	—	$	4,847.5	$	35.3	$	(2,817.1)	$	2,065.7

Note: Northern Trust has elected to net derivative assets and liabilities when legally enforceable master netting arrangements or similar agreements exist between Northern Trust and the counterparty. As of December 31, 2020, derivative assets and liabilities shown above also include reductions of $1,867.8 million and $1,177.2 million, respectively, as a result of cash collateral received from and deposited with derivative counterparties.

(1) This line consists of swaps related to the sale of certain Visa Class B common shares.


	DECEMBER 31, 2019
(In Millions)	LEVEL 1		LEVEL 2		LEVEL 3		NETTING		ASSETS/ LIABILITIES AT FAIR VALUE
Debt Securities
Available for Sale
U.S. Government	$	4,549.1	$	—	$	—	$	—	$	4,549.1
Obligations of States and Political Subdivisions	—		1,615.3		—		—		1,615.3
Government Sponsored Agency	—		23,271.2		—		—		23,271.2
Non-U.S. Government	—		3.3		—		—		3.3
Corporate Debt	—		2,402.7		—		—		2,402.7
Covered Bonds	—		769.9		—		—		769.9
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds	—		2,127.6		—		—		2,127.6
Other Asset-Backed	—		3,330.5		—		—		3,330.5
Commercial Mortgage Backed	—		797.7		—		—		797.7
Other	—		9.0		—		—		9.0
Total Available for Sale	4,549.1		34,327.2		—		—		38,876.3
Trading Account	—		0.3		—		—		0.3
Total Available for Sale and Trading Debt Securities	4,549.1		34,327.5		—		—		38,876.6
Other Assets
Derivative Assets
Foreign Exchange Contracts	—		3,234.8		—		(2,334.1)		900.7
Interest Rate Contracts	—		152.9		—		(3.9)		149.0
Total Derivatives Assets	—		3,387.7		—		(2,338.0)		1,049.7
Other Liabilities
Derivative Liabilities
Foreign Exchange Contracts	—		3,182.2		—		(1,548.6)		1,633.6
Interest Rate Contracts	—		97.4		—		(57.3)		40.1
Other Financial Derivative(1)	—		—		33.4		(12.5)		20.9
Total Derivative Liabilities	$	—	$	3,279.6	$	33.4	$	(1,618.4)	$	1,694.6

Note: Northern Trust has elected to net derivative assets and liabilities when legally enforceable master netting arrangements or similar agreements exist between Northern Trust and the counterparty. As of December 31, 2019, derivative assets and liabilities shown above also include reductions of $1,136.8 million and $417.2 million, respectively, as a result of cash collateral received from and deposited with derivative counterparties.

(1) This line consists of swaps related to the sale of certain Visa Class B common shares.

Changes in Level 3 Assets

The following table presents the changes in Level 3 liabilities for the years ended December 31, 2020 and 2019.

TABLE 57: CHANGES IN LEVEL 3 LIABILITIES


LEVEL 3 LIABILITIES	SWAPS RELATED TO SALE OF CERTAIN VISA CLASS B COMMON SHARES
(In Millions)	2020		2019
Fair Value at January 1	$	33.4	$	32.8
Total (Gains) Losses:
Included in Earnings(1)	18.3		17.1
Purchases, Issues, Sales, and Settlements
Settlements	(16.4)		(16.5)
Fair Value at December 31	$	35.3	$	33.4
Unrealized Losses (Gains) Included in Earnings Related to Financial Instruments Held at December 31(1)	$	18.6	$	12.3

(1) Gains (losses) are recorded in Other Operating Income on the consolidated statements of income.

Changes in Level 3 Liabilities

The following table presents the changes in Level 3 liabilities for the years ended December 31, 2020 and 2019.

TABLE 57: CHANGES IN LEVEL 3 LIABILITIES


LEVEL 3 LIABILITIES	SWAPS RELATED TO SALE OF CERTAIN VISA CLASS B COMMON SHARES
(In Millions)	2020		2019
Fair Value at January 1	$	33.4	$	32.8
Total (Gains) Losses:
Included in Earnings(1)	18.3		17.1
Purchases, Issues, Sales, and Settlements
Settlements	(16.4)		(16.5)
Fair Value at December 31	$	35.3	$	33.4
Unrealized Losses (Gains) Included in Earnings Related to Financial Instruments Held at December 31(1)	$	18.6	$	12.3

(1) Gains (losses) are recorded in Other Operating Income on the consolidated statements of income.

Book and Fair Values of All Financial Instruments

The following tables summarize the fair values of all financial instruments.

TABLE 59: FAIR VALUE OF FINANCIAL INSTRUMENTS


	DECEMBER 31, 2020
					FAIR VALUE
(In Millions)	BOOK VALUE		TOTAL FAIR VALUE		LEVEL 1		LEVEL 2		LEVEL 3
ASSETS
Cash and Due from Banks	$	4,389.5	$	4,389.5	$	4,389.5	$	—	$	—
Federal Reserve and Other Central Bank Deposits	55,503.6		55,503.6		—		55,503.6		—
Interest-Bearing Deposits with Banks	4,372.6		4,372.6		—		4,372.6		—

Securities Purchased under Agreements to Resell	1,596.5		1,596.5		—		1,596.5		—
Debt Securities
Available for Sale(1)	42,022.0		42,022.0		2,799.9		39,222.1		—
Held to Maturity	17,791.1		17,797.4		90.0		17,707.4		—
Trading Account	0.5		0.5		—		0.5		—
Loans (excluding Leases)
Held for Investment	33,558.0		34,017.5		—		—		34,017.5
Client Security Settlement Receivables	1,160.2		1,160.2		—		1,160.2		—
Other Assets
Federal Reserve and Federal Home Loan Bank Stock	275.0		275.0		—		275.0		—
Community Development Investments	919.6		919.6		—		919.6		—
Employee Benefit and Deferred Compensation	215.8		228.9		138.6		90.3		—
LIABILITIES
Deposits
Demand, Noninterest-Bearing, Savings, Money Market and Other Interest-Bearing	$	71,742.5	$	71,742.5	$	71,742.5	$	—	$	—
Savings Certificates and Other Time	937.1		943.0		—		943.0		—
Non U.S. Offices Interest-Bearing	71,198.4		71,198.4		—		71,198.4		—
Federal Funds Purchased	260.2		260.2		—		260.2		—
Securities Sold Under Agreements to Repurchase	39.8		39.8		—		39.8		—
Other Borrowings	4,011.5		4,012.7		—		4,012.7		—
Senior Notes	3,122.4		3,222.6		—		3,222.6		—
Long-Term Debt
Subordinated Debt	1,189.3		1,250.1		—		1,250.1		—
Floating Rate Capital Debt	277.8		264.6		—		264.6		—
Other Liabilities
Standby Letters of Credit	22.4		22.4		—		—		22.4
Loan Commitments	77.0		77.0		—		—		77.0
DERIVATIVE INSTRUMENTS
Asset/Liability Management
Foreign Exchange Contracts
Assets	$	15.6	$	15.6	$	—	$	15.6	$	—
Liabilities	311.8		311.8		—		311.8		—
Interest Rate Contracts
Assets	8.3		8.3		—		8.3		—
Liabilities	10.2		10.2		—		10.2		—
Other Financial Derivatives

Liabilities(2)	35.3		35.3		—		—		35.3
Client-Related and Trading
Foreign Exchange Contracts
Assets	4,245.1		4,245.1		—		4,245.1		—
Liabilities	4,410.7		4,410.7		—		4,410.7		—
Interest Rate Contracts
Assets	289.2		289.2		—		289.2		—
Liabilities	114.8		114.8		—		114.8		—

(1) Refer to the table located on page 105 for the disaggregation of available for sale debt securities.

(2) This line consists of swaps related to the sale of certain Visa Class B common shares.


	DECEMBER 31, 2019
					FAIR VALUE
(In Millions)	BOOK VALUE		TOTAL FAIR VALUE		LEVEL 1		LEVEL 2		LEVEL 3
ASSETS
Cash and Due from Banks	$	4,459.2	$	4,459.2	$	4,459.2	$	—	$	—
Federal Reserve and Other Central Bank Deposits	33,886.0		33,886.0		—		33,886.0		—
Interest-Bearing Deposits with Banks	4,877.1		4,877.1		—		4,877.1		—
Federal Funds Sold	5.0		5.0		—		5.0		—
Securities Purchased under Agreements to Resell	707.8		707.8		—		707.8		—
Debt Securities
Available for Sale(1)	38,876.3		38,876.3		4,549.1		34,327.2		—
Held to Maturity	12,284.5		12,249.3		138.8		12,110.5		—
Trading Account	0.3		0.3		—		0.3		—
Loans (excluding Leases)
Held for Investment	31,239.5		31,517.8		—		—		31,517.8
Client Security Settlement Receivables	845.7		845.7		—		845.7		—
Other Assets
Federal Reserve and Federal Home Loan Bank Stock	301.2		301.2		—		301.2		—
Community Development Investments	749.3		749.3		—		749.3		—
Employee Benefit and Deferred Compensation	199.5		207.6		131.0		76.6		—
LIABILITIES
Deposits
Demand, Noninterest-Bearing, Savings, Money Market and Other Interest-Bearing	$	47,733.6	$	47,733.6	$	47,733.6	$	—	$	—
Savings Certificates and Other Time	986.7		994.2		—		994.2		—
Non U.S. Offices Interest-Bearing	60,400.3		60,400.3		—		60,400.3		—
Federal Funds Purchased	552.9		552.9		—		552.9		—
Securities Sold Under Agreements to Repurchase	489.7		489.7		—		489.7		—
Other Borrowings	6,744.8		6,745.9		—		6,745.9		—
Senior Notes	2,573.0		2,593.0		—		2,593.0		—
Long-Term Debt
Subordinated Debt	1,148.1		1,169.5		—		1,169.5		—
Floating Rate Capital Debt	277.7		262.1		—		262.1		—
Other Liabilities
Standby Letters of Credit	25.5		25.5		—		—		25.5
Loan Commitments	32.3		32.3		—		—		32.3
DERIVATIVE INSTRUMENTS
Asset/Liability Management
Foreign Exchange Contracts
Assets	$	83.1	$	83.1	$	—	$	83.1	$	—
Liabilities	24.1		24.1		—		24.1		—
Interest Rate Contracts
Assets	20.5		20.5		—		20.5		—
Liabilities	21.1		21.1		—		21.1		—
Other Financial Derivatives

Liabilities(2)	33.4		33.4		—		—		33.4
Client-Related and Trading
Foreign Exchange Contracts
Assets	3,151.7		3,151.7		—		3,151.7		—
Liabilities	3,158.1		3,158.1		—		3,158.1		—
Interest Rate Contracts
Assets	132.4		132.4		—		132.4		—
Liabilities	76.3		76.3		—		76.3		—

(1) Refer to the table located on page 106 for the disaggregation of available for sale debt securities.

(3) This line consists of swaps related to the sale of certain Visa Class B common shares.